JOHANNESBURG - The Governor of the Reserve Bank, Lesetja Kganyago, this week punted South Africa's growth prospects in Switzerland, telling investors that the economy's outlook had improved significantly over the past few months.
Kganyago in a speech said recent political developments had generated renewed business and consumer confidence, and investment prospects had been enhanced considerably.
“The improved outlook is based, together with upward revisions to past economic data, on the strong improvement in confidence,” Kganyago said.
“Recent research conducted at the SARB suggests that the collapse in levels of confidence in the past few years had shaved off around 1 percentage point from growth in both 2015 and 2016.”
However, the head of the central bank said a number of domestic challenges remained, and the global environment, while favourable, was becoming more volatile and increasingly unpredictable.
He pointed to a few structural reforms that the country needed to embark on to further bolster growth.
These included telecommunications reforms, which would entail the much-needed release of additional broadband spectrum.
Kganyago said this could add an additional 0.6 percentage points to potential output. Other reforms included lowering barriers to entry by addressing anti-competitive practices, transport sector reforms, and prioritising labour-intensive sectors such as agriculture and tourism.
South Africa has seen a resurgence in sentiment following the rise of Cyril Ramaphosa to head of state and the start of the clean up in state-owned enterprises. Consumer confidence in South Africa surged to a record high in the first quarter of the year, indicating the willingness of consumers to spend more.
The First National Bank (FNB)/Bureau for Economic Research (BER) consumer confidence sentiment index (CCI) raced to 26 points in the first quarter of 2018 from -8 points in last year’s fourth quarter.
However, the South African Chamber of Commerce and Industry’s business confidence index (BCI) released this week shed 1.6 points between March and April. The BCI, however, improved by 1.1 points last month compared to the same time last year.
Graham Tucker, the manager of the Old Mutual Balanced Fund, said the country still faced many challenges.
“But, the market-friendly developments we’ve seen of late, the vote of confidence given to us by Moody’s and the rapid improvement in confidence augurs well for local assets, at least in the short to medium term,” Tucker said.
“After years of constant negative revisions to South Africa’s growth prospects, we believe we’re now past the point of maximum pessimism.”
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